The long term goal of the proposed research is to determine how proteolytic maturation of proproteins regulates the activity and range of action of cell-cell signaling molecules. The Bone morphogenetic protein-4 (BMP-4) precursor undergoes sequential cleavage at two sites within the prodomain. Cleavage at the first site (S1) occurs in all tissues and releases mature BMP-4, which signals at short range and is rapidly degraded. If the prodomain is subsequently cleaved at an upstream site (S2), this converts mature BMP-4 into a long range, stable signaling molecule. The physiologic relevance of S2 cleavage is being examined in mice harboring mutations that disrupt or accelerate cleavage at this site. The proposed studies will ask whether tissue-specific use of the S2 site provides an evolutionarily conserved mechanism for regulating the range of BMP signaling in vertebrates and Drosophila. In addition, these studies will take advantage of the unique strengths of Drosophila imaging and genetics to directly visualize the effect of S2 cleavage on formation of the BMP protein gradient and to test a model for how cleavages in the prodomain regulate the activity of the ligand after it is released. Transgenic flies will be generated that carry GFP-tagged versions of wild-type proDpp (the fly ortholog of BMP-4), or proDpp-GFP harboring mutations that disrupt or accelerate cleavage at the S2 site. The GAL4-UAS system will be used to drive expression in Dpp mutant wing discs or embryonic midgut, where endogenous Dpp is known to signal at long or short range, respectively. Flies will be analyzed for rescue of phenotypic defects, Dpp target gene induction and Dpp-GFP protein distribution. Finally, to test the hypothesis that cleavage at the S2 site regulates signaling range by directing endocytic trafficking of the mature ligand to a recycling, rather than a lysosomal compartment following receptor mediated endocytosis, wild-type and cleavage mutant precursors will be expressed in wing discs in which distinct aspects of endocytic trafficking are impaired and the effect on Dpp gradient formation will be examined. Gain or loss of function of BMP-4 activity leads to structural birth defects. Thus, understanding how BMP activity is regulated in vivo is key to treating and preventing congenital anomalies. [unreadable] [unreadable]